I am a Senior Political Contributor at Forbes and the official 'token lefty,' as the title of the page suggests. However, writing from the 'left of center' should not be confused with writing for the left as I often annoy progressives just as much as I upset conservative thinkers. In addition to the pages of Forbes.com, you can find me every Saturday morning on your TV arguing with my more conservative colleagues on "Forbes on Fox" on the Fox News Network and at various other times during the week serving as a liberal talking head on other Fox News and Fox Business Network shows. I also serve as a Democratic strategist with Mercury Public Affairs.

The Bomb Buried In Obamacare Explodes Today-Hallelujah!

(Note to readers: This article was originally posted in December of 2011 and gained quite a large following at that time. The story now appears to have new resonance as a result of last week’s Supreme Court decision on Obamacare. While my thoughts as expressed in this piece remain the same, I wanted readers to have the opportunity to place them in context in terms of time and space. REU)

I have long argued that the impact of the Affordable Care Act is not nearly as big of a deal as opponents would have you believe. At the end of the day, the law is – in the main – little more than a successful effort to put an end to some of the more egregious health insurer abuses while creating an environment that should bring more Americans into programs that will give them at least some of the health care coverage they need.

There is, however, one notable exception – and it’s one that should have a long lasting and powerful impact on the future of health care in our country.

That would be the provision of the law, called the medical loss ratio, that requires health insurance companies to spend 80% of the consumers’ premium dollars they collect—85% for large group insurers—on actual medical care rather than overhead, marketing expenses and profit. Failure on the part of insurers to meet this requirement will result in the insurers having to send their customers a rebate check representing the amount in which they underspend on actual medical care.

This is the true ‘bomb’ contained in Obamacare and the one item that will have more impact on the future of how medical care is paid for in this country than anything we’ve seen in quite some time. Indeed, it is this aspect of the law that represents the true ‘death panel’ found in Obamacare—but not one that is going to lead to the death of American consumers. Rather, the medical loss ratio will, ultimately, lead to the death of large parts of the private, for-profit health insurance industry.

Why? Because there is absolutely no way for-profit health insurers are going to be able to learn how to get by and still make a profit while being forced to spend at least 80 percent of their receipts providing their customers with the coverage for which they paid. If they could, we likely would never have seen the extraordinary efforts made by these companies to avoid paying benefits to their customers at the very moment they need it the most.

Today, that bomb goes off.

Today, the Department of Health & Human Services issues the rules of what insurer expenditures will—and will not—qualify as a medical expense for purposes of meeting the requirement.

As it turns out, HHS isn’t screwing around. They actually mean to see to it that the insurance companies spend what they should taking care of their customers.

Here’s an example: For months, health insurance brokers and salespeople have been lobbying to have the commissions they earn for selling an insurer’s program to consumers be included as a ‘medical expense’ for purposes of the rules. HHS has, today, given them the official thumbs down, as well they should have. Selling me a health insurance policy is simply not the same as providing me with the medical care I am entitled to under the policy. Sales is clearly an overhead cost in any business and had HHS included this as a medical cost, it would have signaled that they are not at all serious about enforcing the concept of the medical loss ratio.

So, can private health insurance companies manage to make a profit when they actually have to spend premium receipts taking care of their customers’ health needs as promised?

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1. The employment ladder of private insurance companies is synonymous with a pyramid scheme and your grandfather was at the bottom of the pyramid. Even though insurance agents are not the largest contributor to the high administrative costs of running an insurance company they do add to it. Essentially an insurance agent is the vehicle with which, higher stakeholders make large profits. 2. Companies bypass operating within their P&L ratio by augmenting it. They do this by refusing to insure people with previous health conditions, and by using agents as gate keepers to keep risky investments – unhealthy people from being insured. 3. This new law will be applied across the board as was stated in the article. 4. Sorry for taking a shot at your grandfather, but your knowledge of his income is hardly a sufficient and reliable source of evidence that insurance agents are not highly paid. In fact I am a licensed insurance agent, who no longer sells insurance as a result of seeing the nefarious tactics used by the insurance industry to bilk sick, poor people out of money, for a service that people deserve to benefit from by virtue of the idea that good health is something that everyone deserves.

Rick, capitalism will take care of itself. As long as there is a market for something, companies will jump in to make a buck, even at a smaller profit (think Amazon- ridiculously low profit margin, ginormous profits anyways).

If the big, bloated healthcare companies get out for other types of insurance business, then smaller, leaner startups will take up the slack. Trust me, some really smart kids with silicon valley angel investors will come up with an Ap that takes care of all of ones healthcare insurance needs, while spending WAY less on than 15% on their overhead- and they will make a killing.

“it will be left to the only bank large enough to become the nation’s health care insurer – the government.”

for the life of me I can not figure out why you think that is a good thing. The government has been so successful at running every other program into the ground. You think there is waste in the current system, wait till our elected officials get their hands on it!

Not everyone wins with this program. Young, single people, who often don’t earn much, will be forced to buy something they probably could live without. A risk for sure, but one many young people can take. Yeah, I know, they can just stay on their parent’s plan. What if Dad is looking forward to the day they don’t have to pay for Junior? It is most definitely not a “All Win” situation.

There is an out-of-the-box issue that is also never mentioned in these types of discussions, and especially in a business publication like Forbes. One of the comments alludes to how the increasingly hi-tech nature of much of current health care has been driving up costs. What goes unsaid about this, is the seeming bias within most of the health care community toward hi-tech, costly forms of health care rather than toward modes of prevention or cure. It could be argued that we have a ‘Sickness Management’ system rather than a ‘Health-Care’ system. In any for-profit system, the dollars are not in remissions or positive cures, but in a steady stream of income from managing illness and disease – at least it appears that way with our current system. The medical equipment companies like GE love the emphasis on hi-tech, for obvious reasons. An example of this inherent bias toward sickness management and away from prevention and optimal health, is revealed in this article demonstrating the dismal track record of one giant cancer non-profit (ACS). http://www.huffingtonpost.com/samuel-s-epstein/the-american-cancer-socie_b_568292.html If ACS were serious, they would be promoting Vitamin D supplementation (shown to be a cancer preventer in the scientific literature), known herbal remedies (which many drug companies have been trying to replicate in the lab), the avoidance of environmental toxins; they should be calling out the giant chemical and food companies for using suspected carcinogens in foods and food packaging, and they should be encouraging the consumption of organic, non GMO foods. But it seems obvious that their ties to commercial interests create some serious conflicts of interest. Regardless of the disease, there are alternative modes of treatment which are not promoted by the managers of our health care system because they are not glamorous or hi-tech – or profitable. Google Gerson Therapy, Dr. Burzynski, Insulin Potentiation Therapy, Dr. Johanna Budwig… all but one of these alternative treatment modalities are relatively low-tech and inexpensive. But in many cases, the doctors who promote such methods are persecuted by their local medical boards and by the FDA even when they can demonstrate positive results. The usual reason given is that these methods have not been proven in clinical, double-blind studies. But there is a catch-22 here: these kinds of therapies are not ‘profitable’ enough to incentivize the spending required for such ‘gold-standard’ tests. And any proven successes with these modalities would endanger the profits of existing commercial interests. In regards to cancer, it is little known that FDA and AMA officials routinely seek cancer treatement in clinics in Switzerland, Germany, Spain, and Mexico for themselves and family members, because the modalities allowed in these clinics do work better than the usual (and profitable) ‘cut, burn, poison’ methods used here in the States. I’ve only used cancer as an example. There are workable, inexpensive alternatives to mainstream health care methods that can reverse heart disease (Bill Clinton), diabetes, cancers, and nearly every degenerative Western disease, but most of these involve lifestyle and dietary changes and do not fit into the business model of our current ‘health care’ system. while I agree with the main point of the author’s article, until the current health care business model changes, I am not optimistic that our health care system will substantially improve.

I don’t think anything about Government run healthcare is reasonable. If the insurance industry’s free market is not allowed to function with supply and demand then we will certainly be stifling one more industry. Forbes should know better than to allow their journalists to mirror and match editorial style of reporting. Obamacare is just another illustration of President’s ego ruining another facet of the economy. To all the foos who think regulation of free enterprise is healthy enjoy paying for your socialized medicine in your 90% tax.

Rick! any one can see that you are not in business to make a profit. You have no clue as to how iinsurance companies work. Your way the FED printing money is the liquidity. You are very naive – at best.

Don’t forget… it’s called “INSURANCE”, which means there is risk for the insurer – which can be a big variable, or it is NOT insurance, but a utility. An insurance company cannot go into the red and government will continue to squeeze that “20%”, until it is zero. That is the goal of the fools.